In the last week, several new LPFM issues have arisen – one a Congressional push to authorize more of these stations by ignoring third adjacent channel interference to full power stations, and another involving complaints to the FCC about LPFM stations being forced to change channels or cease operation because of interference from changes made by full power stations. The latter issue has apparently arisen in the context of stations taking advantage of the FCC’s rules which made it easier to effectuate changes in the cities of license of FM stations (see our summary of the rule changes here), causing more movement of such stations. Both of these issues could present issues for FM broadcasters. 

The Congressional action was initiated by the introduction of legislation in both the House and the Senate that would eliminate third adjacent channel protections that full power stations have from LPFMs. Those protections have been the subject of controversy since the FCC authorized the LPFM service.  LPFM advocates have contended that the interference protections are unnecessary, as most FM receivers should be able to distinguish between stations on third adjacent channels. The NAB contends that the protections are needed as there are still many radios that would be affected by that interference. Full power stations, except for those authorized at short-spacings prior to 1964, are protected from third adjacent channel interference from each other. Competing engineering studies have been done, the FCC has not acted on this question (and in fact Congress had prohibited such action years ago).  But now, some feel that the time for some liberalization of the rules is in order.

Continue Reading LPFM v. FM – More Stations Coming?

As the clock ticks down to the July 15 effective date of the royalty rates for Internet Radio as determined by the Copyright Royalty Board, webcasters held a Day of Silence today, June 26, to demonstrate to listeners what may well happen if the rates go into effect, and to galvanize their listeners to ask Congress for relief. With the Day of Silence bringing publicity to the Congressional efforts to put the webcasting royalties on hold and to change the standard applied by the Copyright Royalty Board so that it is not focused completely on a hypothetical "willing buyer, willing seller" model, it’s worth looking at some of the other issues that have arisen in the royalty battle in the last few days – including further pleadings filed in connection with the Motion for Stay currently pending in the US Court of Appeals, and the Congressional hearing that will occur on Thursday. 

As we’ve written before, there is currently pending a Motion for Stay of the CRB decision which was submitted jointly by the large and small webcasters and NPR.  Last week, the Department of Justice, acting on behalf of the Copyright Royalty Board to defend the royalty decision, and SoundExchange, each filed oppositions to the Motion for Stay. Each raised many of the same arguments. First, they argued that the large webcasters had procedurally forfeited their rights to challenge the question of the $500 per channel minimum fee by not raising their objection early enough in the CRB proceeding. The DOJ also argued that the damage from the minimum fee was speculative as there was no way to know how that minimum fee would be interpreted. The DOJ contended that, as it was unclear that SoundExchange would prevail on any claim that those Internet Radio services that produced a unique stream for each listener would have to pay $500 for each such stream, the question might end up in a lawsuit – but wouldn’t inevitably lead to the irreparable harm that is necessary for a stay to be issued.

Continue Reading A Day of Silence, A Motion for Stay, and A Congressional Hearing – As the Internet Radio Clock Ticks Down

Should artists waive their rights to performance royalties in order to get airplay on broadcast or Internet radio stations? That questions has come to the fore based on a click-through agreement that Clear Channel included on a website set up to allow independent bands to upload their music for consideration for airplay by its stations. While artist groups, including the Future of Music Coalition, condemned that action, there are always two sides to the story, as was made clear in a segment broadcast on NPR’s Morning Edition, in which I offered some comments. As set forth in that segment, artists may be perfectly willing to allow unrestricted use of a song or two in order to secure the promotional value that may result from the airplay that might be received. For the broadcaster or Internet site seeking such permission, getting all rights upfront may well be an important consideration in deciding whether or not to feature a song – especially in the digital media.

Critics of the waiver made much of the fact that the site was set up at least partially to meet Clear Channel’s informal commitment made as part of the FCC payola settlement to feature more independent music, even though that commitment was not a formal part of the settlement agreement.  (See our summary of the payola settlement, here).  Even to the extent that the informal commitments made by the big broadcasters encompassed making time available to more independent musicians, the critics ignore the fact that the companies do not need any waiver of any sound recording performance royalty in connection with the over-the-air broadcast of those songs, as there currently is no public performance right in a sound recording for over the air broadcasting (though artists and record lables are now pushing for such a royalty, see our story here). Thus, the use of the waiver was only for the digital world – which was not covered by the FCC’s jurisdiction over payola promises or the promises to increase the use of independent music. So, effectively, the company is being chastised for trying to minimize their costs on giving the music even greater circulation through their digital platforms than they initially promised.

Continue Reading Musicians Trade Waiver of Royalty Rights in Exchange for Exposure – Maybe Not Such a Bad Idea

Just when Internet music companies were starting to understand one set of royalties applicable to the use of music on the Internet through the controversy over the Copyright Royalty board decision on royalties for the public performance of sound recordings in a digital delivery system, the Copyright Office held a hearing on Friday to discuss an entirely different royalty – the "mechanical" royalty for the use of the "musical work" in making a "phonorecord."  In plain English, the copyright holder in the publishing rights in a musical composition (the underlying words and music in a song) is entitled to a royalty when a copy of a song using that composition is made.  While that doesn’t sound too complicated, when copies are made in the digital transmission of music over the Internet (and even in other digital media), all sorts of questions arise.  And in the conversations on Friday, questions were raised as to whether the obligation to pay a royalty for making a digital copy even applied to the streaming of a song on the Internet or possibly even the playing of a song on an HD Radio station.  These stations already pay (to ASCAP, BMI and SESAC) for the public performance of a musical composition, but the mechanical royalty is for a different right, and is collected by a different group, and the question being raised was whether a different royalty is also due when music is used a digital context.  This is also different than the SoundExchange royalty that is paid for the public performance of a sound recording (a particular song as recorded by a particular artist).

The Copyright Office held this Roundtable to update the record in a proceeding begun by a Notice of Inquiry issued in 2001 to try to determine how to apply in a digital world the mechanical royalty and the compulsory license for that royalty under Section 115 of the Copyright Act.  That section applies to the use of a composition in the making of a record or CD.  The artist or record company would have to pay the publishing company a flat fee per copy to obtain the rights to use the underlying song.  That fee is currently about 9 cents per copy, though the Copyright Royalty Board is is in the midst of a proceeding that is to determine whether that royalty should be changed.  When applied to the making of a physical copy, that concept is not hard to understand (though, as set forth below, it is not easy to administer).  But, in a digital world, questions arise as to when the obligation to pay a royalty arises.

Continue Reading Copyright Office Holds a Roundtable Discussion of the Mechanical Royalty – Another Confusing Royalty for the Use of Music on the Internet

With July 15 now less than a month away, the new Internet Radio music royalties are still scheduled to go into effect.  Congressional legislation is slowly being considered, and a Motion for Stay to put the regulations on hold pending appeal has been filed (see our post here).  Some discussions on settlement have also taken place, though no deals have been done.  Without some action, payments under the new rules will soon be due.  See our memo, here, for more details on the CRB decision, and all of our posts on this issue, here.  While the legal and legislative actions are still proceeding, and the clock is counting down, the coverage in the popular media continues to grow.  In two recent discussions of the issue, SoundExchange spokesmen seem to blame Internet Radio for the current woes of the recording industry and to justify the high royalty rates through comparisons to the illegal pirating of copyrighted music.  All of these issues will be discussed at a seminar that I am moderating later this week at the Digital Media Conference in the Washington DC area.

One example of SoundExchange’s recent claims can be found in a series of articles found on the Los Angeles Times website featuring a "Dust-up" exchange of viewpoints on the Internet radio issue,  between Kurt Hanson, owner of Internet radio broadcaster Accuradio and the publisher of the Radio and Internet newsletter, and Jay Rosenthal, a Board member of SoundExchange.  Mr. Rosenthal, in attacking the value of Internet radio as a promotional tool, said that while webcasters might excite people about new music, most new music is now illegally downloaded so that the promotion doesn’t actually help the artists.  But, as Kurt Hanson points out, that would essentially be an excuse for never promoting any music in any venue – in fact it seemingly would be an excuse for shutting down the recording industry.  If music promotion just leads to illegal file sharing sites, and little or no music is ever to be sold again, why bother?  Does the recording industry really expect to make up for lost sales by receiving royalties from Internet radio?  Yet the same point seems to be made by SoundExchange President John Simson in a piece done by the PBS program NOW.  That program focused on the Internet Radio station Radio Paradise and how its popular, eclectic music mix will be silenced if the new royalties go into effect.  In that story, Simson also points to illegal downloading as causing the woes of the music industry, seemingly implying that this justifies outrageous royalties – yet offers nothing to tie downloading to Internet radio.

Continue Reading 30 Days And Counting Down to the New Internet Radio Royalty Rates

In our recent summary of the Commission’s order on Digital Radio, we wrote about the Further Notice of Proposed Rulemaking that raised specific proposals to adopt new rules regulating the public interest obligations of radio broadcasters.  These proposals included the possible requirements for a standardized disclosure form for a stations public service programs, limits on a station’s ability to originate programming from locations other than the station’s main studio, and possible limitations on the current ability of stations to operate without manned studios.  A recent Commission decision reminds television broadcasters that there is another proceeding – one six years old – that proposes many of the same restrictions on television broadcasters.  Does the recent mention of this proceeding that so closely parallels the recent radio proposals indicate that some action may soon be forthcoming on the TV proceeding?

The TV proceeding was mentioned in an FCC decision released last week rejecting Petitions to Deny that had been filed against a number of license renewal applications for television stations in Wisconsin and Illinois alleging that the stations had not adequately served the public interest through the broadcast of issue responsive programming, especially programming covering election issues.  In rejecting those Petitions, the FCC stated that its ability to second guess the editorial discretion of a licensee was limited by the First Amendment and by the Communications Act’s prohibition against broadcast censorship.  In this case, the FCC said that the showing made by the Petitioner was not sufficient to demonstrate that the stations had not served the public interest of their communities.  However, the decision noted that the Commission was considering quantitative standards for evaluating the public service of broadcast licensees, citing to the long-pending rulemaking proceeding, and implying that the evaluation of these licensees might have been at least somewhat different had these proposed standards been in place.

Continue Reading Enhanced Public Interest Requirements for TV Too?